Michelle from Morgan Asset Management stated that sticking with one of this year's hottest emerging market trades remains a top strategy heading into 2026, even as the US dollar's selling pressure may ease.

As the firm's Global Head of Fixed Income, Michelle expects further gains in developing nations' local-currency bonds, citing "very high" real yields that will attract underweighted investors to the asset class.

An index tracking emerging market local government bonds has delivered over 15% returns this year, making it one of the best-performing segments in global fixed income. The rally has been fueled by dollar weakness, Fed rate cuts, and trade war uncertainties under Trump’s policies—all driving capital toward emerging market assets.

"While I’m unsure if we’ll replicate this year’s returns," Michelle said in an interview, "the opportunity in local bonds remains exceptionally compelling."

Michelle favors local bonds over hard-currency debt in this space, specifically highlighting Brazil, South Africa, Mexico, Hungary, Romania, and Indonesia. "These are the types of assets we continue to allocate in our portfolios."